The Cato Institute hosted a book presentation by Deirdre McCloskey, a professor of economics, history, English and communication at the University of Illinois at Chicago who spent most of her life as Donald McCloskey, on June 20.
The event was titled "How Markets and Innovation Became Ethical and Then Suspect," and it introduced the prolific author's forthcoming book, The Treasured Bourgeoisie: How Markets and Innovation Became Ethical, 1600-1848, and Then Suspect, an admittedly long subtitle. The book is part of a series on the bourgeoisie.
The program was introduced by Dalibor Rohac, a policy analyst at the Cato Institute, with comments by Donald Boudreaux, an economics professor at George Mason University.
A Wiki search turns up a provocative quote from McCloskey: "Most of what appears in the best journals of economics is scientific rubbish. I find this unspeakably sad. All of my friends, my dear, dear friends, have been wasting their time." The quote is from her book The Secret Sins of Economics, and it goes on to refer to what the great physicist Richard Feynman called "Cargo Cult Science." I am especially intrigued by the quote, because in James Gleick's book "Genius: The Life and Science of Richard Feynman," he laments that so many scientists went into finance, since he did not believe the principles were transferable. This was about two decades before financial products based on complex, untested models would bring the global economy to its face.
The attraction of the event was the prospect of hearing some unconventional ideas about how market innovation went wrong and brought the ethical underpinnings of the financial services industry under suspicion.
Instead, the audience witnessed a rather conventional celebration of how markets developed and fostered innovation during the centuries that followed the Protestant Reformation. McCloskey is an active Anglican and integrated a view of the democratization of religion and church governance into the discussion of the evolution of the role of the market, rather than elites and senators, as the principal arbiter of which innovations thrive and which are left behind.
All this history of markets is then celebrated as the "Great Enrichment," enabled by a single cultural idea — "liberty and dignity for the folks." The fragmentation of church and secular governance enabled innovation to emerge in spite of efforts of authorities to suppress it.
As a source of progress, it is preferable to top-down development sponsored by institutions like the World Bank "pouring things" — dams and steel plants — into developing countries.
Sometimes at book events, the commentary is more intriguing than the featured speech. After crediting McCloskey as one of several authors who had altered his intellectual DNA, Boudreaux went on to discuss the role that ideas and rhetoric play in the application of the theory of Public Choice.
Boudreaux argued that it's ideas that matter, and the theory is real. However, he counseled against despair over the power of special interest groups, as proposed by economist George Stigler. This reference may inadvertently prompt readers to look at Stigler's works and to investigate several other authors Boudreaux mentions, such as Julian Simon and Brian Caplan, which may lead to positive mutations in intellectual DNA.
Boudreaux went on to stress the importance of rhetoric in public discourse, and he listed several phrases that rankle him, such as "natural resources," "legislation" when referred to as law, "public goods," "public servants" (especially "honorable" ones), "consumer advocates" and "national defense."
I maintain an analogous list: "quantitative easing," "normalized earnings," "fortress capital," "prudential regulators," "macro-prudential regulation," "job creators" and "community banks," all discordant notes in the "Music of Deceit." Coincident with the untimely death of James Gandolfini, a Sopranos fan is reminded of the remark by a bit character: "There's no fraud without a narrative."
Finally, readers are left to figure out for themselves where the "Great Enrichment" became suspect as they jumped the tracks and crashed into the wreckage of "Irrational Exuberance" and the "New Paradigm."
Ironically, while Cato was celebrating the ethics of market innovation, the financial markets were in the midst of providing another "buying opportunity."
Perhaps in retrospect, this latest development in the ongoing financial crisis will be seen as another example of the folly of entrusting the management of the global economy to the conflicted so-called experts at the Treasury and Federal Reserve.
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